Marco Funds Ramp Up Option Bets on Aussie After Currency Rally

Macro hedge funds have increased bets on the Australian dollar, boosting exposure to options that pay off if the currency continues climbing against major peers, traders say.

The Aussie logged its two busiest days of option activity versus the dollar last week since late July, Depository Trust & Clearing Corporation data show. On both days, call option volume — contracts that profit when the currency rises — was triple that of puts, with trades of A$150 million ($100 million) or more. The surge came as the Australian dollar touched its strongest level against the greenback since November.

“We have seen sustained interest for AUD call options versus other currencies as the macro community looks to accumulate positions for a potential breakout,” said Ivan Stamenovic , head of Asia Pacific G-10 FX trading at Bank of America Corp.

The Australian dollar is September’s second-best performing major currency, trailing only Norway’s krone. Macro funds are betting its outperformance will extend in the weeks ahead, fueled by resilient household spending, stronger-than-expected growth, rising commodity prices and hawkish Reserve Bank of Australia signals. Governor Michele Bullock earlier this month that robust consumer demand may limit the scope for rate cuts.

Macro funds aren’t just wagering on the Aussie against the greenback. The currency has also climbed to multi-month highs versus other Group-of-10 peers.

Against the Canadian dollar, the Aussie is at its strongest since November, buoyed by weak Canadian growth and labor data. Those reports pushed traders to price in higher odds of a Bank of Canada quarter-point rate cut on Sept. 17. On one of the busiest Aussie dollar option days last week, every trade larger than A$50 million versus the Canadian dollar was a call option, the DTCC data show.

The Aussie has also reached its highest since mid-June against the Swiss franc, after Swiss National Bank President Martin Schlegel signaled the central bank would not to push rates back below zero if needed.

“We have seen interest from hedge funds to express a bullish AUD/USD view via AUD call options in the last two weeks,” said Troy Fraser , head of foreign-exchange sales for Australia and New Zealand at Citigroup Inc. in Sydney. “AUD/CAD and AUD/CHF have also been popular pairs to express this bullish Australian dollar view.”